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A Question Subway Should Be Researching | Market Research in Upstate NY

Subway recently announced that, after an initial four-month period, it is having better-than-expected success with its new breakfast offerings. As a result, the chain plans to expand its breakfast menu and offer more coffee and espresso beverages. (See article – click here.)

Because I am a marketing guy, when I heard about this, my first thought wasn’t that I wanted to run out and try breakfast at Subway, but rather I started wondering what kind of long-term success Subway could have against chains like McDonalds and Dunkin’ Donuts, who are already established and well-branded as quick-service breakfast/morning coffee destinations. And because I am first-and-foremost a market research guy, I immediately wondered, “Have they done any market research on the importance of drive-thrus?”

It is my understanding that some Subway stores have drive-thru windows, but I’ve never seen one that does. In fact, most of the Subway locations I’ve visited are in spots where it would be impossible to incorporate a drive-thru window: in the middle of a strip mall, inside a convenience store, or otherwise nestled in a cozy little retail nook.

It seems to me (and this opinion is based solely on instinct and my own experience as a consumer rather than any hard data) that much, if not most of the market for quick-service breakfast, is composed of people on their way to work and in a hurry to get there. If that assumption about the target customer being a working person on the go is true, then it would also seem that the absence of drive-thru windows at most of their stores would place a fairly low ceiling on the market share Subway can take away from a competitor like McDonalds, where drive-thru service is the rule rather than the exception.

I may be incorrect in making those assumptions, but if I was a decision maker at Subway, I would definitely want to learn as much as I could about how the quick-service breakfast customer differs from their traditional lunch and dinner customers in terms of lifestyle, expectations, preferred ways of receiving and experiencing the product, etc., before committing substantial resources to permanently expand into breakfast. Those are all questions that could be answered fairly easily and inexpensively (relative to other expansion and development costs) through market research.

Subway may very well have already researched the question of how necessary drive-thru windows would be to their success in the breakfast segment. And, it may very well be that they just want to carve out a small niche for themselves and not challenge the current leaders in the category. In any case, this story caught my eye because it is a prime example of how market research can and should be used to address key questions about long-term market potential before a company jumps into a new undertaking with both feet. Now, if I could only use market research to find out how to get that “Five Dollar Footlong” jingle out of my head…

It seems like Taco Bell is also jumping on this trend for fast food locations serving breakfast. You mentioned Drive Throughs being an issue with Subway’s breakfast plan. Taco Bell seems to be ready to go in terms of that. I’m not sure which one will serve better breakfast, but I imagine Taco Bell might have an easier time than Subway just because they are drive through friendly. A lot of people want breakfast, especially fast food type breakfast, on the go. It will be interesting to see how this factors into the success/failure of the breakfast plans for each chain.

I also think consumer perception will play a large role in the success or failure of these chains. Do Subway or Taco Bell seem like a place you would expect to serve breakfast? Are people more familiar with the idea of a breakfast sub, or a breakfast burrito? These views always play a large role in the success or failure. Some places try, but they just can’t get past that point.

I think a lot of it has to do with the “trying it out” phase we see with all new products/services on the market. Once that point passes, we will really see whether or not this return is long-term or not.

This is an interesting take Vance. Believe it or not I actually ran into a Subway franchise owner from Wisconsin this weekend – he had just opened his 7th location this past month. We chatted about the whole breakfast idea because I know we spoke about this post last week. He too was seeing good return on it so far on breakfast.

The owner told me that all 7 of his locations are not set up for a drive-thru (confirming your point) and that Subway itself does not lend to a drive-thru. Their entire process at their chains is low-cost quick service – get in, get out. He talked about how the ordering process even models an assembly line to move customers through. He also spoke about how a drive-thru would slow down service in terms of customers ordering x, y and z on their sandwiches. Typical fast food drive-thrus are limited in their toppings, however Subway chains have lots more veggies/sauces/etc. to add to the sandwich. So if a drive-thru was in place it would add time to confirm a longer order. Having the sandwich made right in front of you eliminates most service errors and gives the consumer a POV on how it is being made behind the scenes (something that McDonalds and many other fast food restaurants lack).

He actually said the biggest issue with this new breakfast promotion revolved around staffing. He has a hard enough time finding dedicated quality part-time on a regular basis, let alone for 7:00 AM. With prep and all, in reality they need to be there well before 7:00 AM or they are not prepared to cater to the ‘working person on the go’.